• Service: Tax, Global Transfer Pricing Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 7/1/2014

Brazil - Swiss companies identified under “privileged tax regimes” 

July 1:  The Brazilian tax authorities issued a Normative Instruction (no. 1,474/2014 (20 June 2014)) that revises the list of countries that are considered to be low-tax jurisdictions and, accordingly, identified as “privileged tax regimes” for Brazilian tax purposes.

Normative Instruction no. 1,037/2010 established the list of low-tax jurisdictions and privileged tax regimes.

The new amendment provides that companies in Switzerland incorporated as holding, domiciliary, auxiliary, mixed or administrative entities and subject to corporate tax treatment that results in a tax rate lower than 20% will be considered as operating under a privileged tax regime. Other Swiss resident entities are also identified as operating under a privileged tax regime if the company has obtained rulings that grant a final corporate tax rate lower than 20%.

KPMG observation

Remittances made to entities in countries that are listed as low-tax jurisdictions or operating under privileged tax regimes are subject to a withholding tax at a rate of 25% (whereas remittances made to other countries are subject to a withholding tax rate of 15%). Transfer pricing and thin capitalization rules are also stricter in relation to transactions with low-tax jurisdictions.

The provisions may affect not just Swiss entities, but for example, could affect U.S. multinational corporations with Swiss resident entities or with other entities with taxation below 20%.

For more information, contact a tax professional with KPMG’s Americas Center:

Devon Bodoh

(202) 533 5681

Alfonso A-Pallete

(305) 913 2789

Murilo Mello

(305) 913 2781

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